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Calculate market equity using below data according to the M-M Approach.
Company XCompany YRsRsNet operating income2000020000Cost of debt02500Net income2000017500Cost of equity0.080.10Market value of shares250000175000Market value of debt050000Total value of firm250000225000Cost of capital (Avg)0.950.08Debt equity ratio00.8Assumptions: 1) no corporate tax 2) equilibrium value is 12%.SolutionThe solution is explained below −Company XCompany YRsRsNet operating income2000020000(-)Cost of debt02500Net income2000017500Equilibrium cost of equity (12.5%)0.1250.125Value of firm160000140000Market value of debt050000Market value if equity16000090000
Read MoreHow to calculate market value of a company?
SolutionThe solution is given below −Company X is unlevered, which means, interest on debt is 0.Company y is levered, which means, interest on debt is 7000 (175000*4%)Market valueCompany XCompany YRsRsNet operating income4500045000Interest on debt070004500038000Profit before taxes4500038000Taxes (40%)18000152002700022800Capitalization rate (12%)0.120.12Market value equity225000190000Market value of debt0175000Total value225000365000
Read MoreHow cost of equity in different countries are calculated?
SolutionThe solution is as follows −Country 1: No taxesa) Debt to equity ratio is ZeroCost of equity = WACC + (WACC – Cost of debt) * (debt/equity)Cost of equity = 15% + (15% - 5%) * 0 => 10%b) Debt to equity ratio is 1Cost of equity = WACC + (WACC – Cost of debt) * (debt/equity)Cost of equity = 15% + (15% – 5%) * 1Cost of equity = 10% + 5% => 20%c) Debt to equity ratio is 2 Cost of equity = WACC + (WACC – Cost of debt) * (debt/equity)Cost of equity = 15% + (15% – ...
Read MoreHow to prepare bank reconciliation statement?
SolutionThe solution is as follows −Cash bookBank statementDividend (Rs.2200/-)Balance (Rs.25000/-)Interest error(Rs.800/-)Uncashed check (Rs.2000/*)Deposited(Rs.3800/-)Uncredited (Rs.3500/-)Cash short(Rs.1200/*)Dues paid(Rs.1000/-)ABC Ltd BankReconciliation statementas on 30th September, XXXXBank overdraft (Dr)25000(+)Check issued (not enchased)2000Dividends on shares (collected by bank)2200Interest charged (recorded twice)800Check deposited (not entered in cash book)3800880033800(-)Cash short (credit side of bank column)1200Dues paid by bank1000Uncredited check (outstation)3500(5700)Balance (as per cash book) (Cr)28100
Read MoreUsing the below trail balance, prepare income statement for the start-up company ABC as on 31st April XXXX
Trail balance of ABC Company as on 31st April XXXXDebit ($)Credit ($)Banking equipment10000DebtorsBank5000Capital16000Drawings600Loan1800CreditorsServices18000Salaries9500Telephone expenses7002580025800SolutionThe solution is as follows −While preparing income statement, we consider only expenses and income.Income => services => 18000Expenses => salaries + telephone expenses => 9500 + 700 => 10200Income statement for the company ABC for period ending on 31st April XXXXDebit ($)Credit ($)Income18000(services)18000Expenses(10200)Salaries95007800Telephone expenses700Net profit
Read MoreCompany X has estimated their demand levels of their product A
Sales volumes of A (units)1500016500182001900020000Probability0.150.180.190.210.22Selling price per unit is Rs. 8/- with marginal cost = Rs. 4.80/- and fixed cost = Rs. 42000/-Calculate probability of company’sa) Break evenb) Makes profit of minimum Rs.20000/-SolutionThe solution is explained below −a) Break evenCalculated contribution costContribution cost= sales cost – marginal costContribution cost= 8 – 4.80Contribution cost= 3.20/-Breakeven point = fixed cost / contribution cost= 42000/3.20= 13125 units (app)Probability of sales more than or equal to 8077 unitsProbability of sales = (0.15+0.18+0.22+0.24+0.26) => 0.95 => 95%b) Makes profit of minimum Rs.20000/-Total contribution = (fixed cost) + profit => 42000 + 20000 => 62000 - ...
Read MoreHow to disable windows firewall profiles using PowerShell?
There are 3 types of profiles that firewall supports. a) Domain b) Public and c) Private profile. You can check the same settings using the GUI in the Windows Firewall Advanced Security settings window as shown below.You can check the above settings using the Get-NetFirewallProfile command.Get-NetFirewallProfile | Select Name, Enabled Name Enabled ---- ------- Domain True Private True Public TrueTo turn off or disable the above profiles using PowerShell, you need to use the command Set-NetFirewallProfile.To disable the specific profile, use -Profile parameter. You can pass 3 different profile ...
Read MoreHow to get windows firewall profile settings using PowerShell?
Recent windows client and server operating systems like Windows 10, Windows Server 2008 onwards, supports advanced firewall versions and they have mainly 3 profiles.DomainPublicPrivate profile.To get the setting using GUI, you need to search in the box Windows Firewall with Advanced Security or Windows Defender Firewall with Advanced Security. Then you can see in the console that 3 available profiles.The above same settings can be viewed with the PowerShell Get-NetFirewallProfile command.PS C:\> Get-NetFirewallProfile Name : Domain Enabled : True DefaultInboundAction : NotConfigured DefaultOutboundAction : NotConfigured AllowInboundRules : NotConfigured AllowLocalFirewallRules : NotConfigured AllowLocalIPsecRules : NotConfigured AllowUserApps : NotConfigured AllowUserPorts : NotConfigured ...
Read MoreHow to check if remote ports are open using PowerShell?
Earlier days we were using telnet clients to check the remote port connectivity, in fact, we are still using it with cmd and PowerShell but this feature is not by default installed in OS and some companies have restrictions on installing new features including telnet.We can leverage PowerShell to test remote port connectivity without installing telnet and with the use of the Test-NetConnection command. This command is also very useful for other diagnostics but we are focusing here for the remote port check.To check if the remote port is open or not we can use the Test-NetConnection command and it ...
Read MoreHow to Copy NTFS permissions using PowerShell?
To change, add or remove security permissions on the files or folder using PowerShell you can use the Set-Acl command. The best way to set the permission is to copy the permissions from another file or folder if you need the same permissions on the destination path.For example, I want the same folder permissions of the source C:\Shared\ to the destination folder path c:\shared1 path. You can use any destination path, it could be the remote shared UNC path.See the difference in the above security permissions, the Shared named folder has one additional permission assigned (LABDOMAIN\Delta). We will copy the ...
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